SIP vs Lumpsum in Infrastructure Mutual Funds: What Works Best in a Capex Cycle?

A CAPEX upcycle refers to a phase where spending on long-term assets (such as roads, airports, and power systems) may increase consistently over multiple years. In the infrastructure sector, this means both the government and private players increase investments to build new assets. 

This phase is usually linked to:

• Economic expansion

• Policy support, and 

• Rising public demand for better infrastructure and services

When the infrastructure sector enters a CAPEX upcycle, it may lead to a potential increase in the NAV of an infrastructure fund. This could happen because the underlying businesses in which these funds invest may benefit as follows:
 

• Stronger Revenue Visibility:

  • Higher government and private spending could lead to a “pipeline of projects” for companies in sectors like roads, power, railways, and construction. 

  • As order books expand, revenue visibility improves, which supports higher valuations in the stock market.
     

• Re-Rating of Infrastructure Stocks

  • During a CAPEX upcycle, investor sentiment toward the sector may improve. 

  • As a result, markets may start assigning better valuation multiples (P/E, EV/EBITDA) to infra companies.

  • This “re-rating” may push stock prices up even before full earnings are realised.
     

• Potential Balance Sheet Improvement

  • Due to improved cash flows, companies may reduce debt and improve financial health. 

  • Lower leverage could reduce “risk perception”, which may further support stock prices.

However, Investors may kindly note that capex upcycle is only an estimation and may or may not happen depending upon different economic conditions.

In the Union Budget 2025–26, Nirmala Sitharaman announced a plan to connect 120 new airports over the next decade, targeting four crore additional passengers. Additionally, some more infrastructure sector developments you may know about are:
 

• According to Morgan Stanley, infrastructure investment in India is projected to increase from 5.3% of GDP in FY24 to 6.5% by FY29.

• In January 2025, the government approved 56 Watershed Development Projects across 10 states with a budget of ₹700 crore (US$ 80.9 million).

Besides, “Actis”, a London-based infrastructure investor, has recently identified India as one of the most attractive infrastructure markets globally. It is planning to double its existing ₹17,500 crore (US$ 2 billion) investment across energy, roads, transport, and digital infrastructure over the next 3-4 years. (Source: IBEF, a trust set up by the Ministry of Commerce).

This combination of rising public expenditure and growing private investment may indicate a potential upcoming “CAPEX upcycle” in India’s infrastructure sector. So, the next question is how to participate? 

You may either start a monthly/quarterly SIP or invest a lump sum in an infrastructure mutual fund scheme. Let’s understand both these options in detail:
 

I) SIP in Infrastructure Funds

In the SIP mode, you invest a pre-determined amount at regular intervals in an infrastructure investment fund (regardless of current market conditions). Such gradual investing may:
 

A) Reduce Market Timing Risk

Realise that infrastructure is a “cyclical sector” and goes through different market phases based on:

• Project announcements

• On-ground execution, and 

• Earnings visibility

An SIP spreads investments across market cycles (both upcycles and downcycles) and could avoid the risk of investing a large amount at an unfavourable time.
 

B) Average Your Purchase Cost

An SIP may allow you to benefit from “Rupee Cost Averaging” where your purchase cost is balanced out. Let’s see how this happens:

• When prices are high (suppose during CAPEX upcycles), your SIP may buy fewer infra mutual fund units. 

• When prices correct, the same amount could buy more units.

Over time, this could lead to an “average cost per unit”. 

II) Lump Sum Investment in Infrastructure Funds

Instead of investing at regular monthly or quarterly intervals, you deploy a single, one-time amount into an infrastructure mutual fund at the prevailing NAV. Let’s see how it may benefit you:
 

A) Higher Potential Upside If Invested Early in the CAPEX Upcycle

If you invest a lump sum at the “early stage” of a CAPEX upcycle (suppose when infrastructure stocks are still reasonably priced), you may get the potential benefit of the full growth journey. 

However, if you invest in CAPEX down cycle, you may also incur a loss on your investment.

As projects are announced, executed, and start generating earnings, company profits and stock prices may rise over time. Since your entire investment is already deployed, it participates in this complete upward movement, rather than entering gradually at higher prices later.

Conversely, if projects do not get executed / completed, then companies may not be able to generate expected earnings and stock prices may fall resulting into loss on investment.
 

B) Opportunity to Invest at Lower Valuations During Corrections

Even within a long-term CAPEX upcycle, infrastructure stocks may experience short-term declines due to factors like:

• Execution delays

• Cost pressures, or

• Broader market sentiment.

Investing a lump sum during such corrections may allow you to enter at relatively lower valuations. This can improve return potential when the sector resumes its upward trend.

There is no single “right” approach! This decision depends on factors such as:

• Market valuations

• Your ability to time the market

• Cash availability, and 

• Risk tolerance limit

Still, for your reference, check out these points:

Need an “hybrid” approach? Many investors even combine both investment routes by starting with a SIP and adding lump sum investments during market corrections. 

So now you know what infrastructure funds are and what a CAPEX upcycle phase means. To revise, an infrastructure mutual fund is a thematic or sectoral scheme that invests at least 80% of its net assets in equity and equity-related instruments of companies in the infrastructure sector.

The sector is considered to be in a CAPEX upcycle when there is:

• Sustained growth in public and private investment

• A strong project pipeline, and

• Improving earnings visibility for infrastructure companies over multiple years.

To participate in such potential CAPEX upcycles, you may invest through an SIP or deploy a lump sum. The “right” approach depends on your ability to time the market, the availability of investible surplus, and your risk appetite.

1. What is the Tata Infrastructure Fund?

The Tata Infrastructure Fund is an open-ended equity scheme investing in the infrastructure sector. The investment objective of the scheme is to provide income distribution cum capital withdrawal and/or medium to long-term capital gains by investing predominantly in equity/equity-related instruments of the companies in the infrastructure sector.

However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. The scheme does not assure or guarantee any returns.

2. Are infrastructure mutual funds risky compared to diversified funds?

Yes, infra mutual funds may have a comparatively higher risk than diversified equity funds. Due to their focus on a single sector, performance may depend heavily on:

• Government policies

• Execution of projects, and

• Economic cycles

This “concentration” may lead to higher volatility compared to diversified equity funds that spread risk across sectors.

3. Should I choose SIP or lump sum for the infra mutual funds?

The decision may depend on prevailing market conditions and your risk appetite. 

• If valuations seem “high” (say during the mature stage of a CAPEX upcycle), gradual investments through an SIP may be preferred.

• If you see attractive valuations or a market correction (say during the early-stage of a CAPEX upcycle), a lump sum may offer better return potential.

4. How does an infra index fund differ from an actively managed infra mutual fund?

Index funds are “passive” schemes that replicate or track a specific market index by investing in the same securities in the same proportion. In contrast, “actively” managed infrastructure funds may aim to potentially outperform their benchmark by selecting stocks based on prevailing market opportunities. 

The views mentioned above are for information & educational purposes only and do not construe to be any investment, legal, or taxation advice. Investors must do their own research before investing. The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. Any action taken by you on the basis of the information contained herein is your responsibility alone, and Tata Asset Management Pvt. Ltd. will not be liable in any manner for the consequences of such action taken by you. Please consult your Mutual Fund Distributor before investing. The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund. There are no guaranteed or assured returns under any of the schemes of Tata Mutual Fund.